Gold Prices Near Two-Month Low Amid Fed Rate Cut Expectations
Gold prices are trading near a two-month low, heading towards the worst week since June 2021 as traders adjust their expectations for a US Federal Reserve interest-rate cut in December.
Reasons for Gold’s Decline
- Bullion has fallen for six consecutive days, with a weekly loss of over 4 per cent.
- Traders have reduced expectations for lower rates in December after Fed chairman Jerome Powell stated that there is no rush to cut rates, citing the economy’s strong performance.
- Policy-sensitive US bond yields have increased, leading to a decline in gold prices.
Impact of US Presidential Election
Gold prices have dropped approximately 8 per cent since reaching a record high on Oct 31, with losses accelerating after Donald Trump’s election victory last week.
The US dollar has strengthened to a two-year high on anticipation of economic growth and higher corporate profits under a Trump presidency. This has made commodities priced in dollars more expensive for buyers.
Factors Supporting Gold Prices
- Gold is still up more than 24 per cent in 2024, supported by the Fed’s easing cycle and central bank purchases.
- Geopolitical and economic risks have also driven haven demand for gold.
Market Trends
The Bloomberg Dollar Spot Index has decreased by 0.4 per cent after reaching its highest level since 2022 on Nov 14.
Silver prices have declined, while platinum and palladium prices have increased.
Despite the recent setbacks, gold remains a strong investment option with significant potential for growth in the future.
Conclusion
Gold prices have faced volatility in recent weeks due to changing market dynamics and geopolitical factors. However, the long-term outlook for gold remains positive, supported by ongoing economic uncertainties and central bank policies.
FAQ
Why has gold prices fallen recently?
Gold prices have declined due to a strengthening US dollar, rising bond yields, and reduced expectations for a Federal Reserve interest-rate cut in December.
What factors support gold prices?
Gold prices are supported by the Fed’s easing cycle, central bank purchases, and heightened geopolitical and economic risks that drive haven demand for the precious metal.